Good morning, everyone, and welcome to Grupo Televisa Fourth Quarter and Full-Year 2021 Conference Call. Before we begin, I would like to draw your attention to the press release, which explains the use of forward-looking statements and applies to everything we discuss in today's call and in the earnings release. I will now turn the call over to Mr.

Alfonso de Angoitia, Co-Chief Executive Officer of Grupo Televisa. Please go ahead, sir..

Thank you, [Tumia] [Ph]. Good morning, everyone, and thank you for joining us. With me today are Antonio Gonzalez, CEO of Cable; Luis Malvido, CEO of Sky; and Carlos Phillips, CFO of Grupo Televisa.

Before reviewing Grupo Televisa's operating and financial performance, I am delighted to share with you some exciting news about Televisa Univision, after effectively closing the merger on January 31.

It has been almost one year since we announced the transformative combination of Televisa's media and content business with Univision, to create a new company Televisa-Univision.

This union has created the world's leading Spanish language media and content company; a business without comparison in the global media landscape that will exclusively focus on the massive market opportunity that exists with a global Spanish-speaking audience of almost 600 million people.

We are very fortunate to have a group of amazing partners that came together to help create this unique platform, and pursue our digital transformation strategy. Wade Davis, CEO of Televisa-Univision and founder of ForgeLight, Eric Zinterhofer at Searchlight, and SouthBank, Google, and [Raymond] [Ph]. Those teams have helped us a lot.

In preparation for this merger, both Televisa and Univision have made significant progress transforming their businesses across all dimensions. Both teams have built upon our brands and deep connection with our audience to deliver levels of viewership these two companies haven't seen in years.

Univision's portfolio of television networks had the highest audience share, since 2014. And Televisa's content performance and audience delivery in Mexico was equally impressive. Univision completely reinvented its ad sales business, and both companies experienced above-market advertising revenue growth in 2021.

And most importantly, we have completely transformed the organization, strengthening our already exceptional teams. By merging Televisa's content and media business with Univision, we have created an unprecedented platform.

Televisa-Univision now reaches over 60% of their respective television audiences in both the United States and Mexico, holding leading positions in both markets. We read over 100 million Spanish-speakers every day across television, digital, streaming, and audio.

We have the most prolific long-form Spanish-language content engine in the industry, and the most powerful Spanish language library and intellectual property. Televisa-Univision is already delivering results that neither company could have achieved independently; and we're just getting started.

One of the most exciting things created by this historic merger is the largest ever Spanish language global streaming platform. With the assets and resources of Televisa-Univision, we are on the cusp of launching something extraordinary.

The history, the brands, the reach, and trust with our audience, the content engine and library of the combined companies have come together with two new ingredients; a massive capital commitment of several hundreds of millions of dollars for Spanish language content, multiples of what any other service spent in the language, and an extreme conviction in the opportunity for the world's first large-scale streaming platform to exclusively serve the Spanish-speaking world.

As we announced on February 16, ViX, our new streaming brand, will be the first-of-its-kind global streaming product with two very distinctive experiences; advertising video on demand, or AVOD, and subscription video on demand, or SVOD, all in one single app, easily accessible for everyone across all major platforms in the United States, Mexico, and 19 countries across the rest of Latin America.

The benefit of having two tiers in one app is that we will be able to easily upsell our premium service to AVOD users, while SVOD subscribers will be able to enjoy these distinctive experiences, each with its unique content proposition seamlessly.

The AVOD tier, ViX, launches on March 31, and promises our users and [linear-light] [Ph] experience that includes light news and sports, and a significant amount of entertainment content across all genre, available in the form of linear channels, as well as video-on-demand, all advertising-supported, and importantly, for free.

At the same time, the SVOD tier, ViX Plus, which will launch in the second-half of the year, is a premium paid experience. Our mission and our promise is to deliver compelling original content produced in the Spanish language. And since this is our only focus, we want to be the Spanish-speaking world's go-to platform.

Between these two experiences, ViX and ViX Plus, in our first year alone, we will have an unprecedented offering of more than 50,000 hours of free and premium content. In the subscription service specifically, we will launch at least one high-quality new movie or series every week for the entire first year.

ViX Plus will feature content developed exclusively for us by some of the master storytellers of Spanish language content, including one of the industry's most respected and popular artist and producers, Salma Hayek, and her production company, Ventanarosa; U.S.

superstar singer and actress, Selena Gomez; Peruvian writer and literature Nobel Prize Winner, Mario Vargas Llosa; Spanish author, Maria Duenas; and Mexican comedian, González Derbez, among many others.

We are very excited about the achievements we have so far since announcing the merger, and look forward to sharing with you the future success of Televisa-Univision.

Three strategic factors lead us to believe, and have confidence that we are much better-positioned than other traditional media players migrating to streaming, and that will deliver on our digital transformation strategy.

First, we have a sizable traditional media business, growing double digits and generating strong free cash flow to fund the launch of our global streaming platform. Second, we have the largest Spanish language content factory in the world that can produced premium content in a cost-effective way.

We also have the most powerful Spanish language library and intellectual property. And last but not least, we have a world-class executive team, and we have built one of the best streaming teams in the industry. Over the last 12 months, we far-exceeded our initial growth expectations, and our prospects for 2022 look equally as impressive.

On a platform basis, Televisa-Univision's revenue for 2021 reached around $4.2 billion, representing year-on-year growth of almost 15%, while EBITDA reached more than $1.6 billion, equivalent to a year-on-year increase of approximately 11%.

We expect the strong revenue growth trend to be sustainable, in 2022, driven by several factors, including one record audience share, and great upfront performances both in Mexico and the United States, two additional partnerships to launch our content on digital multi-channel media program distributors.

Three, the monetization of the World Cup, and four, the launch of our global streaming platform. We expect EBITDA to remain relatively stable this year as we invest in the strong foundation for our next phase of growth, including launching our global streaming platform, acquiring streaming users, and delivering higher revenues.

With that, let me spend some time on milestone achievements; last year, the Mexican economy expanded by around 5% year-over-year. The improving economic environment helped drive solid growth in our Content segment, as advertising activity from the private sector remained very strong throughout the year.

The strategy to turn around our Content segment proved to be successful allowing us to deliver revenue and EBITDA growth of 10.2% and 11.5% year-on-year respectively, taking us back to pre-COVID levels. Our Cable segment also performed relatively well.

And our initiative to expand our fiber-to-the-home (FTTH) footprint by 2 million homes in 2021 was already started to show -- has already started to show initial results. On the other hand, an increase in out-of-home activities led to softer net additions of revenue-regenerating units or RGUs at Sky and lower prepaid recharges.

At the same time, Sky experienced elevated cost related to the higher number of live sport events that were canceled in 2020, putting significant pressure on margins.

All-in, our full-year consolidated revenue reached MXN103.5 billion representing year-on-year growth of 6.3% while operating segment income reached MXN43.5 billion equivalent to a year-on-year increase of 7.3%.

Turning to our fourth quarter results, consolidated revenue reached MXN28.8 billion representing a year-on-year increase of 3.7% while operating segment income reached MXN12.3 billion equivalent to a year-on-year growth of 3.1%. Bernardo and I are pleased to see that most of our assets delivered solid operating performance in 2021.

We are also confident about the opportunities to keep growing in 2022. Now, let me address the fourth quarter financial result in our Content division. Advertising revenue increased by 7.2% as the economic rebound has been driving up marketing activity and advertising spending across the private sector.

Most of our clients are looking to position their brands, products, and services in front of their consumers and Televisa's solid ratings during the fourth quarter particularly on Prime Time created a great advantage. During the fourth quarter, royalties we get from Univision of $110 million were relatively flat year-on-year.

Univision's solid operating performance during the fourth quarter was particularly offset by tough comps given heavy political ad spending in the same period of 2020. In sum, during the quarter content revenue increased by 4% while operating segment income grew by 1.3%.

Our content margin contracted to 47.1% due to the difficult comp associated with more production of content. In 2020, the COVID-19 lockdown led us to have lower content production cost as live program such as sporting events were canceled and we broadcasted several reruns.

Moving on to the full-year, content revenue grew by 10.2% year-on-year, mainly driven by an increase in advertising sales of 17.2%. In 2021, our advertising sales reached MXN19.2 billion and were close to pre-pandemic levels. Operating segment income in our content business was up 11.5% compared to 2020 translating into a 38.3% margin.

This is an increase of 40 basis points from 2020 and the highest margin since 2016. Regarding our upfront, I am very pleased to say that our negotiations with our customers have successfully concluded. We expect advertising deposits to grow by around 13% year-on-year representing the best upfront performance in Televisa's history.

We are optimistic that this will help sustain advertising revenue growth at a solid pace in 2020. During 2021, our main newscast had great audiences. And we are very proud of this achievement.

In the U.S., Univision's ratings on linear television were the only ones to grow year-on-year during 2021, allowing it to increase its overall portfolio share with Spanish language and total television in the United States.

We are very proud to report that the strength of Univision's ratings has been driven by Televisa content which currently occupies most of Univision's Prime Time Programming Grid.

This audience metrics in Mexico and the United States are evidence that Televisa strategy to revamp its content production, which was implemented a couple of years ago has been very successful. Now, let me turn the call over to Antonio, CEO of Cable..

Thank you very much, Alfonso. During the fourth quarter of 2021, our cable segments have an important turnaround in operating metrics. It was the strongest quarter in the year in net adds, coupled with a solid financial performance and strong profitability.

In net add, the fourth quarter closed with 2,000 and 1,000 fixed revenue generating units or RGUs and 17,000 mobile RGUs. It was the strongest quarter of 2021 and the highest since the second quarter of 2019, including the pandemic quarters.

The year closed with 14.6 million RGUs, the result was largely driven by both the realignment of some of our flagship products, as well as the homes pass expansion plan we implemented last year. Our cable business keeps growing due to our higher levels of sales and an improved product mix, which also brings our higher average revenue for user.

In video, we turned it around and had the first positive quarter since the second quarter of 2019, including the pandemic quarters. We reached an inflection point and added 11,000 video RGUs during the quarter, thanks to our improved product mix from the product realignment process.

Today, 75% of sales are triple play and the strengthening of our retention programs. In broadband, we added 58,000 RGUs. The second strongest quarter of the year for a total of 5.7 million RGUs, broadband continues to be the highest margin service. So, we'll continue to enhance its product offering.

Now from the financial metrics, during the fourth order, our cable segment delivered year-on-year revenue growth of 4% while operating segment income increased 8.3%.

Our residential segment revenue grew 4.8% while our enterprise segment, which accounts for around 15% of total cable revenue increased 10.4% mainly due to the timing of revenue recognition. For the full-year, revenue growth at our cable segment was 5.8% and operating segment income grew 7.3% reaching a margin of 42.2%.

We expect that the full impact of our strong operating results to materialize in the coming quarters. During 2021, capital expenditures reached $855 million equivalent to 36.1% of sales.

These investments allowed us to successfully achieve our plan to pass 2 million homes ending the year with 17.8 million homes pass, of which more than 65 are passed by either fiber-to-the-node or fiber-to-the-home.

By the end of the fourth quarter, we have successfully launched products to the home services in the cities of Guadalajara, Toluca, Durango, [indiscernible], and recently Tepic. This will help us to accelerate RGUs net-adds from 2022 onwards. Before turning the call back to Alfonso.

So, let me say that we are convinced that the expansion to selective location makes a lot of sense for each. We have a nationally recognized brand exclusive content and high quality service with comparative offers. Thank you very much..

Thank you, Antonio. Before joining the call to Luis Malvido, let me remind you that, he was appointed CEO of Sky since the beginning of the year, Alex Penna who was a great executive for us decided to retire, and Luis took over. Luis is a seasoned executive with over 25 years holding CEO roles, mainly in the telco sector.

He has led publicly listed and private companies across geographies, including Latin America and Central Europe. Before joining Sky, he was Chairman and CEO of Aerolíneas Argentinas. Previously, he worked for over three decades at the Telefonica Group, where he held a position of Executive Director of HISPAM South.

Luis also spent five years as Chairman and CEO at Telefonica O2 Czech Republic, two years CEO of Telefonica's wireless operation in Brazil, three years as President and CEO of Telefonica Venezuela, and over six years as Vice Chairman and CEO of Telefónica Móviles de Argentina. Having said that, let me turn the call over to Luis..

Thank you very, Alfonso. At Sky, revenue decline by 4.4% year-on-year during the fourth quarter, mainly driven by lower recharges of prepaid packages due to the decline in income confinement related to the pandemic. Operating segment income failed by 13.9% due to amortization of certain sporting events and lower revenues.

Sky had 73,000 RGUs disconnections, mainly driven by the loss of 80,000 video subs during the quarter. On the broadband side, we added 5,000 RGUs during the quarter, which in a total loss of 707,000 customers.

In material slowdown is in broadband net-adds is mostly related to the financial difficulties of all time, our house network and the expected delays in the coverage expansion. In the aggregate, including our MVNO service, which had a 3,000 RGUs during the quarter, we close with approximately 8.2 million RGU.

For the full-year, revenues at Sky declined 0.5% while operating segment income slowed by 6.9% driven by, as I said, an increase in the amortization of certain sporting events, resulting an margin of 38.6%. And now, before turning back to Alfonso, I want to share more color regarding Sky OpEx structure over the coming years.

Excluding 2022, when we will have a non-recurring cost of around $50 million related to the transition -- transmission rights and production of FIFA World Cup, Sky operating costs and expenses should be similar to those in 2021 in real terms..

Thank you, Luis. Welcome to the team..

Thank you..

Moving on consolidated, CapEx were $1.15 billion during 2021, which was slightly lower than our guidance. For 2022, our CapEx target of $860 million includes $620 million in cable to pass 700,000 homes with fiber, increase our subscriber base and support growth. $200 million deploy in the Sky and $40 million in our other businesses.

Finally, I'm happy to report that our Board of Directors approved the payment of our regular dividend in 2022. This will be presented for approval at our annual shareholders meeting. To wrap up 2021 marked a historic moment for Grupo Televisa and our industry.

As we announced the merger of our content and production assets with Univision, created an unprecedented business in the global media landscape. Over the past year, both companies have transformed themselves reaching levels of financial performance and audience resonance that have not been seen for many years. We have hit the ground running in 2022.

The power and momentum of our core business is truly unique and will be a springboard for the coming launch of the preeminent Spanish language streaming platform ViX. At our cable segment, we have laid the groundwork to achieve sustainable growth in the medium term, by accelerating the expansion of our FTTH footprint.

This should allow us to remain the leading high speed internet service provider in Mexico. 2022 will continue to be a year with significant opportunities for Grupo Televisa and we will remain focused on delivering solid results for all our stakeholders. Bernardo and I are very optimistic about 2022.

First, we will continue to capture the upside from the significant growth potential of Televisa Univision by remaining its largest shareholder with an equity stake of approximately 45%. And second, it is very important in every household -- connectivity is very important in every household and we are benefiting from this trend.

So, we will continue to invest and grow in our broadband operations. Now we are ready to take your questions..

Thank you. [Operator Instructions] Your first question comes from the line of Marcelo Santos with J.P. Morgan..

Hi, good morning. Thanks for taking my questions. I have two. The first one is if you could please comment a bit on the performance of Blim in Mexico, during 2021, anything you could share would be very interesting.

And the second question is this, the upfront already includes advertising on the AVOD platform or if it -- is that purely traditional media? Thank you..

Yes, thank you, Marcelo. And to Blim, it's a very different platform than what ViX will be. Blim is basically an SVOD platform, however, we launched, last year, and AVOD version. And it's a good precursor to what ViX will be. We touched the waters in Mexico to Blim to look at that market.

Blim has been able to deliver more than a million subscribers, which will be transferred to ViX. And in terms of users of the AVOD platform, we -- it's an incipient platform, since we launched it last year. And I could say that it has around four million users.

And this platform has delivered exceptional engagement by the users, so we are very happy to see those results, as I have mentioning. ViX is another platform, both ViX and ViX Plus AVOD, and the SVOD platforms will be something very different than we or Univision launched in the past.

In terms of the outcomes, it did include sales of advertising on the AVOD platform on ViX..

Perfect. Thank you very much..

Our next question comes from the line of Alejandro Gallostra with BBVA..

Hi, good morning, Alfonso. Thank you for taking my questions. The first one is related to the [indiscernible] business.

Would you just provide the [interim] [Ph] CapEx guidance for the year? And we can see that the CapEx for the [indiscernible] business is substantially lower than demand that you spend in 2021, and more similar to what we've seen in 2020.

So, could you please outline your FTTH expansion plans for the next two or three years, if this expansion will continue to be new regions, and how many [phones] [Ph] you plan to pass, and then what will be the overall CapEx requirements to [include gross] [Ph]? That will be my first question..

Yes, thank you, Alejandro. We will continue to invest in our Cable segment, especially on the FTTH front. As I mentioned before, we have a full plan, and I'll ask Antonio to go into that. However, for this year, we're optimizing our CapEx.

And, well, Antonio, can you share with us the expansion plan and where we are investing, please?.

Yes, thank you, Alfonso. The first thing I would say is that CapEx, in absolute terms, for 2022 is basically the same as it was in the prior years, except in 2021. 2021 was an extraordinary year, and it was based on a very ambitious expansion plan of two million homes.

This surge in investment was needed -- this lump sum surge in investment was needed because we entered very large metropolitan areas, in Guadalajara, which is either the second or the first metropolitan region in Mexico, and Toluca, which is also one of the top five.

However, one of the things I want to say is that with this investment, easily covers nine out of the 10 biggest cities in Mexico City, which account for over half of the GDP of the country. And more importantly, we cover the three largest, where these are FTTH or fiber-to-the-node.

So, we are going back to our stable way of -- our stable level of CapEx investment. Every so often, we have extraordinary years, like last year or like fourth - like '15 or '16. The second thing is what Alfonso mentioned. We've been working on improving or making our construction parameters more efficient.

That way we will continue our [indiscernible] expansion with higher efficiency and less capital intensity. This will allow us to [indiscernible] resources in other areas. Moving forward, we're going to continue to be laser-focused on upgrading our network, as we have in the past.

We will be opportunistic on how we do, and choose the places and the areas of expanding our footprint based on competition, consumer consumption capacity, potential penetration, ARPUs, et cetera. [Like] [Ph] we want to do this rather than giving general statements about increasing or doubling the size of our company.

Relative to sales, however, we believe it is likely we will see CapEx declining from the levels we've seen, of the mid-to-high 20 in 2022, to low-to-mid 20s in the medium-term. So, I think with this, we have a good pace, we have a nationally recognized brand, with a good name, that provides us with good footing to continue to grow in the future..

Thank you, Antonio..

Thank you for the explanation. And in terms of [indiscernible], you should probably expect the lower pace compared to the two million [indiscernible].

Sure, we are -- absolutely. We are expecting to do 700,000, which is not a small number either. Last year was, as I said, an extraordinary year because we entered very large metropolitan areas in this past year, very successfully, I would say. But, you know, 700,000 is what we're projecting for this year..

Okay, great, thank you. And my second question, also related to cable. I would like to hear from you about the dynamics that you are experiencing in your regions that you'd be entering with FTPH in the last two quarters, last year, in terms of competition, pricing, ARPUs, precision rates, that would be pretty helpful. Thank you..

Well, I think the competitive landscape of the cable market has been changing in the last few years; it has become a lot more competitive. So, we have to be very efficient and very competitive in our products.

In the last quarter, one of the reasons we had a significant turnaround in our sales and our increasing net ads was because we repackaged our products, and we repackaged, especially, our flagship products to make them more competitive vis-à-vis the competition.

Having a national -- and having national coverage means that in some places we compete against one company, and in other places we compete in -- with another. In some places we compete against both or three of the companies. So, we have to be very regionally oriented to try to get the best in each of the markets.

And I think the story of the fourth quarter is perfectly sustainable. I'm going to -- I would say that for the first time in over a year did we have positive net ads in video, which is a very good story. And most of our sales are triple play. So, the product mix is allowing us to increase ARPUs solidly and sustainably..

Great. Thank you very much for the explanations..

Our next question comes from the line of Gordon Lee with BTG..

Hi, good morning. Thank you very much for the call, and congratulations on the closing of the transaction. A couple of questions, the first, and between the quarter and the press release, you discuss a couple of, I guess, were reassessments from the tax standpoint for the previous years.

I was wondering if you could give us maybe a little sense of the magnitude and, more importantly, whether that has already been taken care of or whether some of this will spill over into 2022 as well.

And the second question is, with the transaction having been closed with the $3 billion partial monetization of your content business likely to hit your balance sheet in this quarter, and the fact that Televisa-Univision will really fund its own investments with its own internal cash flow.

Could we expect that the Televisa level to maybe see more cash being returned to shareholders, either via a step-up in the buyback or maybe, beyond this year, an increase in ordinary dividends? Thank you..

Thank you, Gordon. As to your second question, we're going to be opportunistic about deployment of capital. Of course, we will invest, as we have been mentioning, in FTTH through Izzi; that's a priority of ours. And then, we will deleverage. We will be paying down debt, also, opportunistically. So, you will see more of that happening very soon.

Those are the two priorities. But in terms of buybacks, we have been buying stock, and we will continue to buy stock. And those are our priorities. As to your first question, I'll ask Carlos Phillips to answer it..

Hey, Gordon, thanks for the question. And regarding your two questions, I guess you're referring to changes in income taxes for the quarter. And as you mentioned, these were adjustments that were made for, in one case it was income tax from prior years, where there was an assessment from the tax authority and we had to do an adjustment.

And the second one was a partial write-off of the first income tax that we had, from 2014. So, both of those items, if those were the ones that you were referring to, are one-offs that we wouldn't expect to continue in the future..

Perfect. Thank you very much..

Our next question comes from the line of Leonardo Olmos with UBS..

Hi, good morning, everyone. The first question, I had two quick follow-up questions. The first one is about cable. You discussed [homes passed] [Ph] in the previous question. And my question is now regarding homes connected. How should we think about homes connected, in 2022? Can we expect over 50,000 net ads per quarter again? Thank you..

Antonio?.

Thank you. I think what we see and what we expect is to continue the trend we had in the fourth quarter. So, we are seeing an acceleration from quarters two and three, and this should be sustainable, and this should be steady, with a gradual acceleration, as has been happening. What we are seeing, as I said, is that change in our product mix.

So, we should expect the speed to be gradually accelerating accelerating from the fourth quarter, but at that level.

Was that clear, Leonardo?.

Very clear, thank you -- Good news. My second question is regarding streaming. So, you mentioned that you had around one million subs in Blim, they will all be switched to the advertising video-on-demand, so the regular base.

Can you provide any type of metrics that we could think, and then track, regarding the subscription video-on-demand products, meaning is there any way we can think of how many subscribers you would potentially think you can have in the ViX Plus? Thank you..

Yes, well, of course, the total addressable market is huge; it's 600 million people that speak Spanish in the world, that's the addressable market. Of course, we're going to focus, as I mentioned before, our attention first on Mexico and the United States' Hispanic market.

And after that, the Latin American markets, and then other places, such as Spain. So, that's the total addressable market that we will approach. It's a $7 trillion GDP, as like I've mentioned in the past. And the good thing is that the $3.5 trillion of those $7 trillion are just the GDP associated with the U.S. Hispanic market and Mexico's GDP.

So, we believe that we have the strength to capture those subscribers. As I mentioned, we're launching the AVOD product, so we can upscale, we can up-sale the subscription product. Both of them are going to be very attractive.

Our main focus, our mission is to deliver -- to have a platform that delivers the most important content in the Spanish speaking world, and the most content in Spanish in the world. Also, the most soccer games of the Mexican Soccer League, and other relevant tournaments. So, we will have more soccer than any other platform in the world.

So, we believe that the -- I mean, what we're seeing is really exciting. Of course, we'll start to announce the number of subscribers once we launch the platform, ViX Plus. So, that will happen in the second-half of the year..

Thank you, very good. Just a quick follow-up about the advertisers you are having a progress successful for 2022.

Is that transferable to the advertising video on demand? Are you having conversations with advertisers to fund this type of -- fund or invest in this type of the new product? How should we think about the advertising being transferred to date?.

Yes. Well, that's a very good question. I think the upfront was -- the best upfront in the recent history of the Televisa, as I mentioned. I think that the upfront had to do with several factors.

The first one better economic activity, the second is that we're experiencing fantastic ratings and audience growth in our flagship channel and also on Channel 5, but especially on primetime, which is what where you -- where you sell at higher rates.

Third, I would say that we have a revamped sales team, sales organization, and that's helping a lot and we're being much more efficient in terms of selling advertising.

I could say, a force that we're focusing on selling the unique reach that the Televisa can deliver to our clients, to our advertising partners and fifth getting to your question, we have included the [indiscernible] product, which looks amazing and is going to be really successful.

So, clients are now focusing on a [indiscernible], I would say that it's the same in the United States, where the ViX product were included in the [indiscernible] gained traction and it's looking great as well in terms of advertising sales..

Sounds great. Thank you very much. Happy Friday for everyone..

Thank you..

Our next question comes from the line of Soomit Datta..

Thanks very much. I have two or three quick questions, please. Firstly, on PrendeTV, can you give any senses to the sort of size of the subscriber base or the user base? I think the narrative has been very favorable, but it would be great to get senses to how that is scaling.

Secondly, just on the S4 launch, I think on the Univision call I may have misheard this, but I thought Wade mentioned early Q3 launch. Can I just kind of clarify whether that was right or not? And then thirdly, please, just a bit of detail on the P&L from Q4, please.

I think the, the other operating line there was a game book for it obviously which was significant, but if we split that out, there was quite a large negative in this quarter looks to be kind of financial advisory legal fees, some merger costs as well. I think the corporate expense line was a bit higher as well.

So, it would be great just to get a sense as to what exactly was buried in that number. It seemed a fraction higher than it would normally be. Thank you..

Yeah. Thank you. Great questions, Soomit, as always. To your first question that has to do with PrendeTV. I think it's important to mention that our strategy and progress have been hugely benefited by having PrendeTV in the market for three quarters of 2021.

With Prende in the market, we were able to put a full distribution in place across all platforms key MVPs and major C manufacturers and get those partnerships up and running. So, that has been great because it has helped us a lot in terms of our launch of ViX.

With Prende live, we were able to test different content and programming strategies and also refine the relationship between television and the streaming platform. And we were also able to take Prende through the '21, '22 upfront, as I mentioned before and establish premium pricing and build a significant base of advertisers.

So, they looked at as Prende, and of course they saw the attractiveness of it. And so now we have a very good base of advertisers to bring into ViX. And so we have activated 45% of our linear advertisers on the PrendeTV platform. And this is great as we prepare to transition them into ViX.

So, I could say, in general that Prende was a huge benefit for us in getting a head start and refining our strategy. I could say the same thing as to the [indiscernible] product that we launched in Mexico through [indiscernible] last year. And so that is base that will transition into ViX.

As to your second question, as Wade mentioned, the mount will be in early Q3. As to your third question, I'll ask Carlos to answer it, please..

Yes, I as you mentioned, there were a couple of moments that were interesting in the other income line, as you mentioned, there was a positive movement, which was related to our sale, which was a positive number, but that was offset partially because there were also other gains that we had the previous year, including the sale of our radio business and the reimbursement of a legal outcome that we had with another company, those kind of match.

And in terms of the corporate expenses, you're right, I mean, we did have some non-recurring increases in legal and advisory expenses. We also had because of the transaction with Univision and the restructuring and separation process, we have a little bit slightly higher than normal severance costs. Those were in the content business.

And we also had a little bit more in our cable business. And then there's another non-recurring corporate expense in that line, which is related to one of the previous questions that was about income taxes.

Given those assessments, we also had an increase in surcharges related to those income taxes from a couple of years before, but again, most of these are non-recurring in nature..

Thanks.

With just a follow-up -- putting that all together, we think that line will kind of normalize from Q1 or is there I guess the deal close a bit more to come?.

Yes. It should normalize in the sense that we're not going to have another sale in the future. But again, this one is subject to for example, once -- now that we have the closing of the transaction, you would expect to have a gaining, for example, in that line because of the content merger.

And we still we have a few other legal and advisory items that would be non-recurring for this quarter probably. But yes, we would expect it to normalize. Most of these changes were non-recurring..

That's great. Thank you very much..

Thank you, Soomit..

Our next question comes from the line of Matthew Harrigan with Benchmark Company..

Thank you. I was curious if you could talk a little bit about your venture capital business since you're one of the top five participants in Mexico. Now I know most of it is funded through on air advertising and clearly ViX and involvement of Google and SoftBank help you there perceptually.

I know that isn't that large an item at this point, but it does feel like is an interesting area that sometimes doesn't get a lot of discussion. Thank you..

Yeah. Thank you, Matthew. Great question and it's something that we feel really proud about especially in Mexico and now taking this to the United States through Univision.

Basically media for equity this model implies exchanging available advertising time slots for an equity stake in high growth startups or business to consumer companies that have not had the opportunity to advertise on free to air television and other platforms of ours.

We select companies based on their potential basically, and that are in early stages of development.

Usually, companies that could not afford strong advertising campaigns on free to air television, on paid television and other platforms, but would certainly appreciate just advertising deployment to position their products, to position their brands, to position their companies.

So, we see this as a great opportunity, first of all, to show the market, the relevance of free to air television to create and position of brand as top of mind. And also I would say to optimize the use of our available inventory.

And of course, this gives us the opportunity to invest in companies with high growth potential without any type of cash outflow. In recent stories of success using this mechanism, we have invested in Quebec, we have invested in [indiscernible].

And we're doing this basically together hand in hand with SoftBank and in certain other cases with General Atlantic as a partner. They're the ones that identify the opportunities and of course, do extensive due diligence, extensive analysis as to opportunities and the industries, the clients, et cetera.

So, far we have closed eight investments in seven companies four of which are unicorns. And that's why we feel proud of the companies we have identified early on. And this has been great. As I mentioned, we're taking this to the United States as well, this model and we're starting to close deals through Univision as well. So, this will continue to grow.

We have a pipeline of around 20 new investments. Of course, we're very selective and careful about those. As I mentioned we always do those hand in hand with SoftBank, General Atlantic and now with others.

So, we'll be very strict and careful about those, but it's basically using our unsold inventory for purposes of promoting these startups -- these new companies. So, up to now, it has been amazing to be able to invest in [indiscernible] and others. I mean, as I mentioned, four of this have become unicorn, so we're very happy about this venture..

Thank you so much..

Our next question comes from the line of Alejandro Chavelas with Credit Suisse..

Hi, Alfonso, thanks for taking my question and congratulations on the results. Most of my questions have been asked already. Perhaps just a little bit more color on Sky. There was really an important loss of subs in media.

Perhaps if you could tell us, what are you doing about -- do you think perhaps there is a possibility of reducing prices, premium pricing to keep some subscribers. And what are your targets for 2022 in this business? What are you aiming to achieve? Thanks..

Yes, thank you. I think what happened in the case of Sky of the subscribers in that platform, we had the challenging quarters as the economy recovered, but mostly as people left their homes. And so, the recharge rate on our [indiscernible] product was lower than we experienced when I mean -- when we have the lockups.

So we believe that that Sky is a fantastic company, has a fantastic brand in Mexico. It has a great team throughout all the country. And it has also a great product especially through [indiscernible], which is a prepaid product that is based on recharges.

I think the Sky product is based on the strength of the content that it has specifically of the soccer content that we have been able to secure there. So, we believe that it's a company that of course is challenged, but it's a company that is going to be there for the long run and it has a great market..

Right. Thank you. So, what you're saying is that perhaps the -- that these connections were because of people that didn't do recharges for [indiscernible] rather than losing let's say more premium subscribers..

Yes. It was focused basically on recharges, on a lower recharge rate..

Right. So, going forward, we should expect at least normalization in this line..

That is correct..

Great. Thank you very much. Congratulations, again..

Thank you..

Our next question comes from the line of Carlos Legarreta..

Hi, thank you, Alfonso andteam. Just a couple of questions on cable, first, I was wondering if you could talk about why the margin in the cable segment was so high during this quarter. I mean, that was a positive surprise for sure. And secondly, how should we think about OpEx in the segment for 2022? Thank you..

Antonio?.

Thank you very much, Alfonso. Thank you very much, Carlos for the question, I think the margin for the expansion and the margin for the quarter is explained by two areas. In one, as I said, in my previous interventions, there was a significant turnaround in the net adds in sales.

So, that increase our revenue, but we're also having some [indiscernible] results on cost containment measures that we're doing. We're improving our procurement practices and containing our general OpEx. So, all of the combination of these two is what increased the margin.

For us procurement practices, very competitive bidding makes a big difference because our capital expenditures are so high in not only in the expansion part, but also for the operating part for equipment in the homes, et cetera.

So, we have instituted some better procurement practices in bidding processes that have allowed us to contain some of the increases in costs. So, that's why the margins have increased.

Yes, regarding to OpEx, the budget for 2022 that we are -- we have proposed, we contained in OpEx increases, more or less to zero, besides the fact increases that we have to have in salaries, et cetera, OpEx was constrained to not have any increases and to absorb the growth in our -- in with our existing number of workers, et cetera.

So, we hope and expect this profitability trend to stay same and gradually improve..

Yes..

So that should be -- sorry, flat in nominal terms, real terms, just to understand better..

Well, we're going to -- we have salary increases. So, I mean, for sure it's going to be flat in real terms, but the way we targeted the budget was we tried to make it flat in nominal terms other than salaries and expenses that have to -- yes, and expenses that have to increase.

There's nothing we can do about salaries and other [indiscernible] expenses, like electricity, all the other services that we buy. But all the discretionary OpEx let's call it that we put it flat in nominal terms, but if you look at it, you will see some increases as I think it's normal..

Of course. Thank you for your comments..

Thank you..

Our last question comes from the line of Fred Mendes with Bank of America..

Hello. Hello, good morning, everyone. Thanks for the call. I have two questions which are kind of follow-up as well. The first one on cable, you mentioned that, two reasons for the improvement in [indiscernible]. But I was also assuming that as you extend our FTTH coverage.

I'm assuming that you charge a little bit more with these let's say higher quality product than we would have higher margins. So, just wondering there was no impact on this part from the entire cable representation and the read through 2022, that that would be the first question.

And then the second question that you just on the content is very strong again 13% year-over-year.

But I mean, when I look to this especially to be plus we understand that the type of content that you be drawing the platform is quite different than the content that you are producing now, especially for this close, so just don't you confirm these it makes sense these line of thinking. Thank you..

Antonio Gonzalez?.

Man, I -- can you repeat exactly what the explanation on your margin first was? I didn't quite get it.

What the addition was?.

No. Perfect..

I'm sorry about it. Yeah. I'm sorry about that..

No, no. No worries. No worries.

No, the point is you mentioned the question two reasons why the margins on cable were so much higher on this quarter, right? But I was assuming that as you expand your FTTH coverage, which is a higher quality product, you would be able to charge a little bit more, and consequently have high margin at cable, but [indiscernible] impact as a benefit for the margin.

So, just wondering it make sense that once you rollover you have to change, this margin should naturally increase because that's a product with a higher margin, so just wanted to confirm..

Sure. Absolutely, the FTTH where we expand with FTTH, the margins are higher. So, let me confirm that. But, I think the results for the quarter are not quite done for that. But, we should expect as I said the profitability to very gradually improve as this goes on.

And as our footprint in FTTH increases, our margins should increase also gradually with the corresponding CapEx that we have do with it..

Perfect, perfect. Clear, clear. And then the second question about the content [indiscernible] as well..

Yes, I think before touching on the content let me share with you the combination of Televisa and Univision is so unique that if you look at it -- if you look at the prospective numbers, the core business of both Televisa and Univision if you look at the upfronts in both countries that are historical, is growing double digit.

So, the core itself is growing double digit. And we generate a lot of free cash flow both in Mexico and in the United States. And this is unique for a content company such as ours such as a combined one because then using that free cash flow, we will be able to finance the expansion into streaming. So, the core is growing double-digit.

That generates a lot of free cash flow. And with that, we can invest in the future in streaming. So, that's pretty unique for a media and content company in the world. As to content, first of all let me touch on the experiences. We will have as mentioned ViX and ViX Plus. So, this will be in the first year this year in 2022.

And there we have an offering of 50,000 hours of free and paid premium Spanish language content.

This will include all genres, movies, series, lives sports as I mentioned more specifically soccer, live news, and of course the current Televisa and Univision hits as well as access to the huge library that Televisa has of top franchise content and formats from the Televisa's vault.

And going to your question in the subscription service specifically, we will launch one high quality new movie or series every week for the entire first year. So, as I mentioned at the beginning, ViX Plus will feature content developed exclusively for that platform. And, this includes Salma Hayek and her production company.

Selena Gomez, we are producing as we mentioned one of the best novellas written by Mario Vargas Llosa. And we have engaged Maria Dueñas, Santiago Limón, the top Mexican comedian Eugenio Derbez, and many many others that are producing content specifically for ViX Plus for that platform.

So, we will see a lot of content going into ViX into the [indiscernible] platform. As I mentioned before, the results that we see in terms of selling targeted advertising on that platform included in the upfront in both countries are great. And then on ViX Plus, we think that the engagement will be great.

And we will be able to capture a lot of subscribers starting this year with this premium content..

Perfect, perfect, Alfonso. Very clear, thank you..

We did have someone come into the queue. Our next question comes from the line of [Guillermo] [Ph]..

Yes.

Can you hear me?.

We can..

Great, perfect. Just a couple of questions, first one maybe on cable, given the ads and what Antonio said it seems that you had challenges this year like pushing through inflation, especially with Mexico 6% inflation. So, how comfortable are for the next year that you are going to be able to pass through at least inflation in the cable company.

Then, maybe on the second one you mentioned something about the use of capital and being opportunistic. So, your bonds are -- most of the foreign denominated bonds are trading about par [indiscernible] expensive front. And the ones in the local currency [indiscernible] is not very far away from corresponding condition.

So, how would you define which debt to prepay or not? And when we take a look to stock specially given the quarter adjusting the non-recurrence and the EBITDA decrease of 4%, it seems like the [indiscernible] is close to zero. So, no profitability on that part.

So, how do you define buying your own stocks knowing that you know, zero percent or more detail on the opportunistic definition that you are mentioning? Maybe you are expecting structural change in rate of the vehicle.

Maybe another question for the ViX on the [indiscernible] the Eugenio Derbez and the one series each week, what's going to be the OpEx for the first year of Vix, because we are watching Netflix pushing out $25 billion in OpEx, [indiscernible] $60 million in OpEx.

So, what's going to be our range in ViX for the [indiscernible] week in terms of OpEX? And just finally on the investment, the private equity investment that you mentioned [indiscernible], are you doing that through our fronts, vision fronts, or are you taking individual risk for those investments? If so, what is the targeted threshold, the IR that you are expecting in those investments? So, fourth point, the cable, the use of capital, the ViX OpEx, and the IR expected, or any other threshold for the private equity investment?.

Thank you very much, Guillermo. What we would do in the future is we are looking on our competition all the time. So, it will depend on the market environment and how all of this evolves and how the content evolves.

One of the things that we have done and one of the reasons that we are happy that we see a turnaround in the fourth quarter was we repackaged our products and we tailored our products regionally and depending on what the demand and the consumer acquisition power was. So, I think that we are successful.

And we are going to continue to do this in the future. And depending on how the market conditions are, we'll make these decisions as we go along..

As to the repurchase of -.

That's part of the cable, right?.

Correct, that's for the cable. That is correct..

Thank you..

As to the repayment of debt, I'll ask Carlos to answer that question..

Yes, Guillermo, to your point of [indiscernible] when we say we are going to reduce debt opportunistically, I think it's a couple of features we are looking to accomplish. As you can imagine, one of the [indiscernible] that we want to address is to reduce our interest expense as much as possible.

So, we will try to focus part of the debt reduction in part of the debt that we can reduce at par. Obviously, banks helping, things like that. But as you mentioned in your question, there is a couple of other securities that we have up there that are fixed rate in pesos and dollars.

Some of which pesos was in particular below par and the dollar ones are pretty high priced. So, I guess what we are going to be monitoring in the next quarters and months is going to be how the curve -- the interest rate curve in Mexico and in the U.S. moves. So, we can do these repurchases in the most optimal way to reduce our interest charge.

And we also have to take into consideration the balance at which [indiscernible] in terms of currency as well as the maturity expansion that we end up. So, I think it's a complicated answer in the sense that there isn't one factor that we have to take into consideration.

We have to take into consideration many, some of which are more in the market's hand than ours. More in terms of how rates and FX move. But the idea definitely is to reduce our leverage with most of the proceeds from the transaction..

So, there is no clear path between bond and stock buyback, but just you are going to be tactical, right?.

Yes, that's correct. We are going to be reducing the [indiscernible]..

Okay..

As to the OpEx of ViX, I would say that I mean Univision has not disclosed what that figure will be. What I can say is that we will invest hundreds of millions of dollars this year. And, those are being as I mentioned before financed by both synergies that have to do with a combination of Televisa and Univision.

And second because I am considering the free cash from EBITDA and free cash flow that Televisa Univision combination will deliver. Keep in mind that Univision paid Televisa in 2021 $470 million of royalty in terms of the global license agreement. And that will be collapsed into Televisa Univision on top of the synergies that I have mentioned.

So, this is what I have mentioned in terms of the uniqueness of a company in terms of growing double digits of the core business and having the free cash flow generation to finance our future to finance streaming. As to your question that had to do with media for equity deals, we don't do them through Vision Fund or any of those funds.

We make those investments directly in the equity of those companies. Of course, I mean the IRR it depends on the industry, depends on the company itself, depends on the stage of matureness of the company et cetera. So, it's very difficult to have one defined. And that's basically what we are doing there..

At this time, there are no further questions.

Do you have any closing remarks?.

Well, thank you very much for participating. We are very, very excited about the prospects of Televisa Univision, the launching of the streaming service, ViX and ViX Plus, and also both cable and sky.

As to our other businesses, hopefully as a result of loosening of the restrictions that have to do with COVID, we will see a much better result this year. So, thank you for participating and call us if you have any additional questions..

This concludes today's conference call. Thank you for participating. You may now disconnect..